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Why New Gold Stock Is Tumbling Today

By Matthew DiLallo - Feb 13, 2020 at 1:50PM

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The gold miner couldn't cash in on higher gold prices.

What happened

Shares of New Gold (NGD -3.01%) slumped more than 12% by 12:45 p.m. EST on Thursday. Weighing on the gold mining company's stock were its weak fourth-quarter results. 

So what

New Gold reported an adjusted net loss of $0.04 per share during the fourth quarter, which was $0.01 per share worse than analysts expected. The main issue was weaker production, which drove up its costs. 

A stock chart with gold nuggets in the background.

Image source: Getty Images.

The company produced 101,423 ounces of gold equivalent during the quarter, pushing its full-year total to 486,141 ounces. While that was within the company's annual guidance range of 465,000 to 520,000 gold equivalent ounces, production at its Rainy River mine came in toward the lower end of its forecast range. That was due to lower throughput at its mill facility and a lower-than-expected ore grade during the fourth quarter. 

Because of that, the company's all-in sustaining costs (AISC) ballooned to $1,862 per ounce during the quarter, which pushed its full-year average to $1,310 an ounce, though that was still below the low end of its $1,330 to $1,430 guidance range. The higher costs in the quarter more than offset the benefit from an increase in the price of gold.  

The company also provided its outlook for 2020. It expects gold equivalent production to be around the same range as last year at 465,000 to 515,000 ounces. However, it expects its AISC to decline to between $1,260 and $1,350 an ounce. Given that guidance, its profitability should improve if the price of gold remains at its current level.  

Now what

New Gold continues to struggle with keeping a lid on costs because Rainy River hasn't always panned out as well as hoped. As a result, New Gold hasn't been able to cash in on higher gold prices this year. This issue will likely continue weighing on the company until it can start delivering on its large investment to build up that mine. 

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